Sunday, February 2, 2014

The wrong way to talk about it

Among a myriad other sources of environmental news, I'm on New York Times environmental blogger Andy Revkin's FaceBook feed, which means I get bulletins from his wide reading and web surfing, as well as from his professional travel in the environmental world, which is nice for me since, although I know I need to do it and comply to the best of my abilities and patience, I don't overly care for this kind of travel and schmoozing.

(It's bad for the sheep and gardens, and everything else I take care of, when their primary caretaker is gone. My students, I think, benefit when I get out to conferences and meetings, since I'm always stimulated by the people and ideas I meet. But a little of this kind of thing can go a long way.)

Revkin, by the way, in addition to having far more stamina for social interaction in general, is an advocate for blogging and other social media as a better medium than traditional journalism for having national and international conversations about complex environmental problems. I think I agree with this. My own experience blogging with students and collaborators here on Sustainability Thought and Deed has been very positive, and I think this kind of writing definitely makes me a better thinker and teacher. In particular, it's a way of participating in the debate while still working on real biophysical sustainability at home and at the college. (All those air miles, y'know...)

In this particular case, Revkin promoted a blog post by Canadian energy business professor Andrew Leach, of the University of Alberta. Dr. Leach explains the traditional neoclassical economics case for not worrying too much about fossil energy scarcity in national economic planning.

This airs one of the key economic issues in the overall sustainability and climate change debate. You can read the material here on Leach's own academic blog:[1474503399443904]&action_type_map=[%22og.likes%22]&action_ref_map=[]

Another, less technical, version is here:

I'm well familiar with these arguments since they were one focus of my PhD. One of my PhD advisors was Herman Daly, who takes quite the opposite point of view, with a series of compelling ecological economic arguments as to why resources, especially fossil energy resources, are categorically different than other inputs to the economy, and so need to be treated so in national planning and accounts. At one point in my PhD work, I even managed a live interview with Julian Simon, now passed away, one of the primary proponents of Leach's viewpoint, sometimes called "cornucopianism" in the literature.

I came away with the distinct impression that Dr. Simon was, more or less, full of himself and these ideas, and enjoyed the controversy, money and fame that his iconoclastic utterances gained him, especially from right-wing organizations and fat-cat moneybags, whose interests his theories served. It left me with an uneasy feeling about the nature of fame in the academic profession, and contributed to my resolve to continue to keep my feet firmly rooted in energy engineering, green building work, and agriculture, as well as academics.

Leach is not, I feel, a full-blown cornucopian. The rest of his blog reveals him to be a moderate conventional economist with, for that ilk, fairly strong environmental interests. He probably understands that things are more complex than Simon believed. But he trots out the familiar arguments, including the Hotelling Rule, to demonstrate again Simon's main point -- in the "pure" context of economic thought, infinite economic growth is theoretically possible on a finite planet. He disagrees with (or hasn't heard of) the ecological economics criticism of the Hotelling Rule approach.

So, let's debate him.

Biophysically, as Daly often repeated, this is Kenneth Arrow's "impossibility theorem."You'll never get a physical or life scientist to accept this point of view, since it contravenes the First and Second Laws of Thermodynamics. Since we can't explain how the world works without these two useful laws, we'd like to keep them around, and so we'll always argue against economists who feel, from within the narrow viewpoint and tortuous logic of their own profession, that the natural laws are expendable as long as we get the economics "right".

In other words, economists often think they don't have to make physical sense. They make unscientific assumptions. And they find complicated reasons from within economics itself as to why this doesn't matter. No other science or social science is allowed to do this!

(I'm so glad I took engineering and biology before economics!)

Part of the problem is the language. Daly and other ecological economists assume that growth means growth in the scale of biophysical material and energy inputs, and waste outputs, to and from the economy.

Of course infinite growth in the scale of biophysical resource throughput is not possible on a finite biophysical planet. Let's not be silly. And even were it possible, it's not desirable. No-one I have ever known except perhaps Julian Simon was so-one-dimensional as to be willing to think that paving the planet was a nice idea.

So we (Leach) needs to parse some words more carefully. He probably means to say infinite "economic growth", or infinite "growth in GDP", is possible on a finite planet.

If so, what is instead possibly true, more carefully stated, and can be read into or alongside Leach's argument, is that, in the context of the Hotelling Rule and the associated asymptotic declines in resource stocks, as well as ever-more extreme recycling of metals and plastics, it may be theoretically possible to provide ever-increasing amounts of subjective, psychic economic services using smaller and smaller quantities of scarce biophysical resources. If we can do so while trammeling population growth we may be able to continue with something that looks like today's high throughput economic growth to the punters, i.e., the consumers, but uses far smaller amounts of resources, while using a political economic system that looks more or less like capitalism.

I explain, in detail, why we may want to, very carefully, go down this road here. This makes me a moderate among ecological economists. I don't want to jump immediately to an ecological economic system. I want to get there carefully. (But in time to avoid the worst impacts of climate change.) I'm motivated in this by the history of other economic "isms", especially communism and fascism. They didn't end well, and I don't want to repeat their mistakes, so I describe a pathway that gets us to ecological economics without as much room for blunders and unexpected outcomes. But I still want to get there. I just don't think it will be easy or without risks or problems.

So let me be clear: I see a transition period in which we accept continued economic growth as an inevitable stage in the evolution of human economic thinking, on the way to the equally inevitable acceptance of ecological constraints, in other words of sustainability.

I doubt Leach would agree, but we could agree on other points. You see, essentially, to get to where Leach says we can go, we'll actually have to become more sustainable in all we do.

See, the problem with Leach's explanation is that he doesn't go on to describe what his economy of infinite economic growth on a finite planet actually looks like. He doesn't explain how, for instance, we'll actually use oil when there's very, very little of it left at the end of the Hoteling trajectory; that, for example, one of the productivity increases he'll be looking for might easily come from using renewable energy to save scarce expensive fossil fuel stocks for important purposes, and so on.

Eventually, either way, you'll get to a point where you're using very little fossil fuel to run the economy, mostly for specialized material inputs that have very high value, such as important plastics needed to save lives in hospital treatments. Oil, as one of my other thesis advisors, MD Robert Sprinkle, suggested, will become too precious to burn. You'll instead be running the planet on sunlight and its useful derivatives, wind, wave, and hydropower. Markets or no markets, the real message of the Hotelling Rule is that you get to sustainability in the end.

The real difference is, Leach implicitly wants the market to do the work, while sustainability activists would like the government to step in and accelerate the process. He doesn't say that out loud, but Hotelling Rule only works under market conditions. The assumption of free or lightly regulated markets, especially for money and so interest, is one of the assumptions of Harold Hotelling's rule. For this reason it's often trotted out in defense of resource capitalists. Leach should explain this, and doesn't. 

But a Hotelling solution to ultimate oil scarcity would likely be too late for a lot of things we know and love, such as the Albertan and Maine climates and natural ecosystems.

You could more happily choose to accelerate the Hotelling process by using government power, especially taxes and subsidies, and as a result perhaps avoid the worst effects of climate change on human and biological systems. These are external to the Hotelling calculation, which is a major oversimplification.

So Professor Leach's arguments are not carefully stated and give the wrong impression. They make you think that we don't need to worry about oil, when we clearly do. But the problem is not that there's too little, but too much. And even the way we'll get to the result he imagines is actually by having lots and lots of people in government and industry realize that they need to increase the marginal efficiency of the natural capital of fossil fuel, and come up with ways of doing so, including regulation and innovation. That's how it works. We get there by worrying about it, not by not worrying about it. Hotelling's market solution is just one, particularly slow, way to worry about it, that is particularly unresponsive to the climate crisis. We can and should do better.

And while Leach makes these over-simplifications, they're not made in a political vacuum. His oversimplified explanation, if believed and used in this attenuated form, will serve to increase the political power of the folks who want to keep burning oil and coal as fast as we're doing right now, and decrease the political power of those who feel we'd better slow down for the climate's sake, such as Michael Mann, who can be read here arguing against the Keystone Pipeline.

Interestingly enough, if believed and used, Leach's oversimplified explanation will also enrich him personally, since on his "conflict of interest disclosure" page, an otherwise laudable innovation, he specifies the oil stocks he owns and  income and other support he's received directly or indirectly from the oil industry. I don't want to belabor this point -- Leach is clearly not one of the "bad guys." He's just got a stake in the outcome. As do we all. It's just that some of us are less well educated about the climate part of this stake than others, and so, like Leach and indeed the entire Canadian province of Alberta, we become effectively, apologists for our own denial and our own self-interest. But if Leach's ideas are used and believed, it will also help enrich, for instance, the Koch brothers, currently funding an anti-democratic political campaign in the United States. So such utterances are risky, and should be challenged.

Arguably I have similar conflicts from my own work in renewable energy and my own divested retirement portfolio, and so also have a stake in the outcome, but I don't think this is at quite the same scale. I don't directly own wind or solar power stocks. I own a small retirement fund, blindly invested in social choice stocks and other equities. I'm quite comfortable with the ethics of my own career and investments, perhaps more so than Dr. Leach is with his. Maybe he should think about divesting in order to further his credibility.

(I also wonder if the Koch brother's consciences' trouble them at all. But that's a whole other story. We live in interesting times.)

All this is good material for the more motivated students in Economics of Resource Conservation and Sustainability this fall. We'll eventually talk about all these bits of theory and their political and cultural contexts in class. I sent the url to this blog post to Dr. Leach. We'll see if he responds, or better yet, involves his own students in the discussion. So far he has not, but it's only been a day.

But, for now, we're going to start talking soon about the economic thought of EF Schumacher.

Better get reading.


Mick said...

Andrew replied on his own blog:

Thanks for taking the time to respond at such length. I’m actually surprised that people would see any way to take this as a justification for burning as much oil and coal as we can, when it’s essentially the exact opposite. As you say in your piece, “to get to where Leach says we can go, we’ll actually have to become more sustainable in all we do.” That’s basically the point – if you think of the limit condition of Hartwick, it’s an economy when you are able to maintain constant per capita consumption while using less and less resource, something which we could only accomplish by both finding new ways to generate energy, making more efficient use of the energy we do produce, and ensuring that we eliminate uses of energy which generate net costs. I would expect that we don’t disagree as much as your piece implies with respect to what that looks like.

The degree to which our economy “depends” on oil, is certainly debatable in the long term, but not in the short term. In the short term, oil shortages are indeed highly disruptive, whereas the long term would see an entirely different story. If you haven’t done so, read Jevons on the exhaustion of coal on the late 19th century. Not only was he spectacularly wrong about coal, the more important part of the argument was that in which he argues that oil represents a poor substitute for coal and that the industrial economy depends on it and it alone. I expect that similar arguments were made with respect to other productive by finite resources over time.

Again, thanks for reading and replying.


Mick said...

To which I replied:

OK, like I said in my response, we can probably agree on the application of Hotelling. (Hartwick is an addition to Hotelling, so I will continue to refer to the original. It’s the asymptotic Hotelling trajectory that does the intellectual “work” you want done. Apologies to Canadian pride.) I would just put more emphasis on the details of the thinking, engineering, and finance (including subsidy) that goes into advancing beyond fossil energy.

I think you gloss over my other, possibly more important point, which is the effect to which your attenuated explanation has on the politics and public discourse. You published an article in Macleans blog which, if misread (and it almost certainly will be), essentially justifies oil sands exploitation on the grounds of Hotelling’s rule. Not a word about externalities.

Not a note about Alberta’s intellectually crippling conflict of interest. I think this is a fairly clear case of denial.

I’m going to copy over the comments to my own blog, so my students can follow this.

Mick said...

I also noticed that, after his blog post and post on Maclean's blog, Andrew had to cancel his Twitter feed because of Internet trolls.

I followed up with this:

"Quick follow up: Isn’t the reason you had to stop your Twitter feed because of the positive and negative blowback from your posts? Demonstrating that you’ve been misread?"

Mick said...

Andrew then replied:

Sure, it all needs a lot more detail. The point which I was trying to make is that having an economy which uses significant amounts of a finite resource, and continues to use some declining amount of that resource over time, can continue to grow – that’s also Hartwick’s point. For what it’s worth, you can get the Hartwick result without the Hotelling result holding, as long as you have fungible capital – you could have constant per capita consumption with a finite resource even if the extraction of that resource were not strictly optimal from an intertemporal perspective. If you don’t have fungible capital, you can still make it work in the limit, but you’d have consumption Euler equations which don’t hold over time.

With respect to the oil sands, I have no idea how you can read the Maclean’s piece as justifying the extraction of the entire oil sands resource on the grounds of the Hotelling rule, or how that would imply ignoring externalities. At least in so far as the Hartwick implementation is concerned, it’s a model of per capita consumption, and so any costs which are “external” to production decisions would remain internal to consumption, so any reasonable implementation of the Hartwick rule would take them into account. If you take the time to read my writing on the subject, I think you’ll be hard-pressed to find support for a “dig it all up and screw everyone else” approach to oil sands.

Feel free to re-post anything from here you see fit.


Mick said...

MW Reply

Quick follow up: Isn’t the reason you had to stop your Twitter feed because of the positive and negative blowback from your posts? Demonstrating that you’ve been misread?

AL Reply

No, the reason I’ve taken a break from Twitter is to find a better balance between it and the rest of my life.

Mick said...

Andrew, it’s not me that’s misreading the piece. I’m fully familiar with the theory, possibly more so than you since I was made to learn the ecological economics criticism too.

It’s the people making comments on the Twittersphere and the comments on Maclean’s blog that are misreading your piece. This should be obvious, and I find it funny that you can’t see this.

The reason, which is clear to me, if not to you, is that your explanation is attenuated, if not entirely misplaced in the context in which it is published, especially in Maclean’s, and has political impact that you didn’t imagine would occur.

Your mystification over “misreading” is perhaps excusable naïveté. What would perhaps be a greater fault would be if you teach this material without balancing it with the various alternate viewpoints.